DAPPCON 2018: VariabL State Channels for Derivatives... - Hadrien Charlanes (VariabL)

Transcript

derivatives an interim so quick words about variable we aim to offer a secure and efficient peer-to-peer derivatives on a theorem so quickly peer-to-peer their values their values our contract that are used in finance to manage your risk against some market events so for instance you may want to increase your exposure to a certain asset or certain index or you want to decrease your exposure to it so peer-to-peer very derivatives it's some people some business that wants to increase its risk another one that wants to decrease and we match them together in a contract so yes so we've we've launched a prototype last year but a simple one so it was a

24 hour contract for difference so meaning that you could long or short on either for duration of 24 hours so a shorter longer together for 24 hours and 24 hours later the contract is resolved and if it went up the the longer wins so it was really interesting we had a lot of traders we learn a lot about the UX especially the identity component and signing messages because in blockchain you always have you want your user to sign messages and yeah so the the actual their values were a lot unchanged so you

had the derivative contract coded as a smart contract so of course it's not efficient and it's it's really not perfect so that that's why so it looks it looks like that and so now let's let's take a look about our challenges if we want to compete with sunrise exchanges to offer better margin trading and better risk management so first if we really want to compete with some transactions we have to be compliant so variable phone artist needs to be a permission a platform with kyc we need to be a scalable and as easy to use as a centralized exchange so of course we need to have the same kind of transaction per second

and the same kind of easiness and the most important point I guess is that we have to be as secure as sunrise exchange and snap that's not easy at all because we often sell blockchain as something super secure but actually it's really hard to be - it - this one tries some important stuff so this is something that is the hardest challenge I would say and we try to be pragmatic in our approach we try to use some things that work today and think that are pretty sure to work we're not trying to theorize that merge sustainable we aim for the long term really the aim is to have something that works not to build

hype and we try to be as flexible as possible like so we want to be agnostic to potential breakthrough that could happen in the ecosystem so for now we focus on unchained custody I think that that's the most important point that with the most important change that you can do using blockchain is remove the custody of distant rise assets to summarize exchanges we have this sunrise assets let's have this one try sky study and we research on how we can maybe this rise more than just custody so this past 18 months we've we've been doing what so we didn't go to ICO because I think that both on the regulatory side and even on

the understanding of what is a token and how it can be used it's a bit too early but we know that tokens are amazing to coordinate a community so we launched contribution tokens that rewarded alpha testers and later they're going to be turning to maybe a utility or security token the the part on which we worked the hardest with the scalability of the exchange we've been working on state channels for the past 18 months and we have today working prototype I think that you'll be able to see it soon and on the robustness of our derivatives so we a zero-sum game between traders we need to make sure that they are robust and

finally we we've locked we've worked a lot about compliance of exchanges in Europe and in compliance in France so so this talk will we will present a lot about layout to recap and what are our specific implementation of layout you is about and why we made this change these choices so basically they are - the goal is to create option transactions so transaction in a subnetwork that doesn't use the strong and soup and super expensive consensus that is an idiom but you create your own consensus and somehow you're linked unchanged so

often you have users that send messages and these messages activate events that are deterministic and you store it in a state of yourself network iron chain you have the way to initiate use that network often you have the custody of the phone so that way you you leverage the strong and and secure consensus of the interim blockchain and you also write the rules of the exit and the conflicts so basically you send messages of chain it creates proof that could be understood Unchained to resolve conflicts to enter to exit and then you have to trade the link between

option and and chain so of course the sub Network the side chain the stationers listen to the blockchain and and take the event into the States and they have and we have to find a way to send the state of our seven network unchanged so usually it's using Merkel proofs and stuff like that so now the iterance map contract that is used to in to create these side chains again rules to enter this the sub Network you have to stake you have to deposit you have to give ID proof the routes to exit how can you say now I want knife phones back maybe you have to to give a proof again the smart contracts need to be

aware of your cell network and it's in the EVM that everything should happen they exit the the resolution of conflicts so that that's how we use smart contracts today so the concrete example of of variable so you have the strong consensus the the very strong and sexual consensus on a theorem annual and you have our own consensus mechanism and variable so if a user wants to do trade on an unviable he'll have to deposit either say ten either on the mention our Sachin will see this event it will go

through our consensus mechanism it will be accepted as yes he deposited on chain so then he'll be credited ten ether on verbal then using our fast and efficient consensus mechanism he can do a lot of open long closed long like he can trade the a lot like likely would on its on transition and at the end you will say on the Seven Network on variable side chain I want to exit now I want my fifteen ether back because I earned five ether and so again transaction goes through the state of our side chain and then so our side chain is taught as a as a marquetry and we send the market routes

on the verbal smart contract and III room and then after the process of validating this state because there are some times where you can challenge the state and things like that so after the recruit has been validated he can now request unchain to withdraw the fifteen ether yes and for that he he he gives a proof the Merkur path of of the state that is taught and our state anyways so he gives a proof and he gets the ether back so in the end he could have done a million transaction unbearable he had only to do two transaction unchanged

and we as a side chain had to do some transaction to update our state so now this this this could be applied to a lot of logic and here you've seen that we I haven't talked about our consensus mechanism on the side chain and I think that this depends on the complexity of your logic and all you need so now let's let's talk about about verbal needs so we do CFG VFD again is a contract between between two percent when that is betting on the prius price increase and and another one a price decrease so if

you buy us a CFG you buy today and you thought that you will sell tomorrow so you're longing on eater and if you sell us Reggie or you're shorting on eater so and you can do that with leverage meaning that you can with one either and if you choose the leverage five with one ether you can expose yourself to the price of five either variable schedule a car seat or in ether so you deposit ether and you get profit and loss in ether with that you can control your risk again either let's say you have deposit when ether you shot on one ether in the end your position is stable so this is the example of a bull you have a starting price here it's a

leverage once we deposit one ether and exposes himself to an ether if the price goes up yes profit otherwise yes so verbal wants to be a competitive exchange so competitive compared to sunrise exchange and a trustable one so we need to have fast autumn matching we want to be noncustodial and we need our transaction to be publicly that anyone can verify them and so we needed deterministic financial engine that way anybody can rebuild the state of our side chain another point is that since we have leveraged piatra PCIe at some

points let's say you have a shorter and longer together if the price decrease too much the longer needs to be liquidated so we need to have a way to liquidate people we need to have a market engine that is always looking at the market and that ax so that's why the consensus mechanism we have for now unguardable is a provable to reach you with only one unique validator that is our deterministic market engine so it's completely centralized we validate every transaction but it's completely verifiable meaning that anybody can have access to the efficient transactions and

since the engine is is deterministic anybody can rebuild the state so that way we keep the non-custodial properties we are transparent and secure and on top of that okay for now it's a POA with one validator but later we can create incentivization maybe poor for decent raising the validation but I'm not sure it's a fit for exchanges but at least the verification trying to some tries incentivize more better verification I think I don't have time but yeah unchain we have the accounts our identity Kol C verified we deposit the value of Chen

new trade and you have to state channels that have that has the audiobook the derivative contracts and the market engine so just wear out for us the success factors we need to be super super precise about the specs especially the financial specs we need our market engine to be Android person clear and that people that use our derivatives know exactly what will happen of course on this layer to part we need the game very really strong and but the most important thing I think is we doesn't write some important parts of what used to be exchanges we need to be really as secure as NASA and it's you've seen that with banker recently it's not

that easy to decent right stuff and we want to be compliant so yeah that's really our work of the past two years after the it was first to create this orange an alpha like ether Delta but we've been working super hard on legal side and scalability sides and security side so now we have the prototype that is working we are doing amazing work and the research it's steadily researching and we learn a lot of new things every day and now our focus is to hiring outside of blockchain technicians that can bring those security and and yeah so I think

that's all for that and I want to thank you know just because they're prejudiced events it's an amazing team so much inspiring so thank you [Applause]